9911796707
TMI Blog2018 (12) TMI 1609X X X X Extracts X X X X X X X X Extracts X X X X ..... roviding contract Software Development Services (SWD Services) and providing Information Technology Enabled Services (ITES) to its holding company Evolving Systems USA as a captive service provider. The transaction of rendering software development services to holding company was a transaction with an Associated Enterprise (AE) and was therefore an international transaction. As per the provisions of Sec.92 of the Act, income from international transaction has to be computed having regard to Arm's Length Price (ALP). It is not in dispute between the Assessee and the revenue that the Transaction Net Margin Method (TNMM) was the Most Appropriate Method (MAM) for determination of ALP and that the profit level indicator to be adopted for compari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all being adjustment u/s. 92CA Rs1,40,06,512 4. The difference between the price charged by the Assessee and the ALP determined by the TPO viz., Rs. 1,40,06,512/- was added to the total income by the AO in his drat assessment order as addition on account of shortfall being adjustment u/s.92CA of the Act. 5. The Assessee filed objections to the draft assessment order by the AO before the Disputes Resolution Panel (DRP). The DRP in its directions held that ICRA Techno Analytics Ltd. and Datamatics Global Services Ltd. are not comparable with the Assessee and were liable to be excluded from the list of comparable companies as they agreed with the Assessee that these two companies are not functionally comparable to the Assessee, (ii) So also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent Systems Ltd., were considered by the ITAT Delhi Bench in the case of Agilis Information Technologies India (P) Ltd. Vs. ACIT (2018) 89 taxmann.com 440 (Delhi-Trib.) for the same AY 2012-13. In this regard it was submitted that the functional profile of the Assessee is same as that of the Assessee in the case of Agilis Information Technologies India (P) Ltd., is identical in as much as the said company was also involved in providing SWD services to its AE and the TPO had chosen 16 comparable companies out of which 6 companies chosen by the TPO in the case of the Assessee for the purpose of comparability were the same. His submission was that the decision rendered by the Tribunal in the case of Agilis Information Technologies India (P) Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intangible assets and therefore not comparable with a software development service provider such as the Assessee in that case. (b) Larsen & Tourbro Infotech Ltd., was excluded from the list of comparable companies by relying on the decision of the Delhi Bench of ITAT in the case of Saxo India (P) Ltd. Vs. ACIT (2016) 67 taxmann.com 155 (Del- Tri). The discussion is contained in paragraphs 4.8 to 4.10 of the Tribunal's order. The Tribunal held that L & T Infotech Ltd., was a software product company and segmental information on SWD services was not available. The Tribunal also noticed that the appeal filed by the revenue against the tribunal's order was dismissed by the Hon'ble Delhbi High Court in ITA No.682/2016. (c) Persistent Systems ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... formed the shareholders that the company continued in its journey to be innovators and leaders in the fields of location based services related geo platforms and advanced survey techniques. There is no segmental reporting because it is stated in the annual report that this company is only in one segment viz., GIS based services and therefore there is no requirement of segmental reporting. It was also submitted that this company owns substantial intangibles equivalent to 10.42% of its total turnover. 11. The TPO however has regarded this company as a comparable company by observing that this company develops software for mapping and geospatial services and operates a few development centres in India. The company is predominantly into softwa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pany is not in software development services business. The TPO has overlooked this aspect and proceeded on the basis that the presence of intangible assets would not be significant. Rule 10B(2) of the Income Tax Rules, 1962 (Rules) specifically provides that for the purposes of sub-rule (1) of Rule 10B, the comparability of an international transaction with an uncontrolled transaction shall be judged with reference to the following, namely:- (a) the specific characteristics of the property transferred or services provided in either transaction; (b) the functions performed, taking into account assets employed or to be employed and the risks assumed, by the respective parties to the transactions; 14. In the given facts and circumstances, ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
